STAND

KRA dismisses tax returns hitch but admits to system gaps

Companies to wait until end of April to file returns under 25% regime

In Summary

•The taxman has admitted to a gap in the system for income tax company returns for those whose accounting period ended from April 2020 onwards.

•This is the period corporate tax had been reduced to 25 per cent, from 30 per cent under the government Covid-19 relief measures.

KRA headquarters/
KRA headquarters/
Image: FILE

A week after a reported tax returns glitch at Times Tower, Kenya Revenue Authority has come out to affirm its systems are working.

The taxman has however admitted to a gap in the system for income tax company returns for those whose accounting period ended from April 2020 onwards.

This is the period corporate tax had been reduced to 25 per cent, from 30 per cent under the government Covid-19 relief measures.

Last week, reports emerged that KRA could not collect 2021 company taxes since it was yet to make available the correct tax returns forms on iTax.

According to a number of companies that had tried to file, the forms in the system were calculating taxes at 30 per cent instead of the 25 per cent that was implanted as part of the Covid-19 relief.

“As a result, companies are not able to file their returns for 2020, and therefore they cannot pay the taxes which are due on April 30,” a system user had alluded.

In addition, the first installment tax for 2021, which is due April 20, cannot be paid either because it is based on the tax paid in the previous year–2020.

“Despite many inquiries from taxpayers, KRA has remained quiet only telling them to wait for the forms to be uploaded. This is like to cause a major crisis in government revenue since companies are major contributors,” a taxpayer told the Star.

Commissioner for domestic taxes Rispah Simiyu yesterday said for companies with accounting periods ending before April 2020, the current income tax return is sufficient to facilitate the filing as the applicable tax rate for these companies is 30 per cent.

The only system enhancement pending is the income tax company return for companies whose accounting periods come to an end from April 2020 going forward. The updated return with an applicable rate of 25 per cent will be available in the system by end of April 2021
Commissioner domestic taxes Rispah Simiyu

She said the taxman is in the process of finalising the system updates for income tax company returns for companies whose accounting period ended from April 2020, going forward, to enable them file returns with the applicable rate of 25 per cent.

The return will be ready by end of April, she said in a response to inquiries by the Star.

“The only system enhancement pending is the income tax company return for companies whose accounting periods come to an end from April 2020 going forward. The updated return with an applicable rate of 25 per cent will be available in the system by end of April 2021,” Simiyu said.

The affected companies are however still able to pay the balance of tax for 2020 in i-tax since it is possible to make payments in i-tax before filing the respective income return for the year, KRA has noted.

“The tax payable is computed from the financial statements hence the companies are required to pay the balance of tax as per their tax computation,” she said.

On installment tax, KRA has dismissed any gaps or challenges saying the financial statements and tax computations for 2020 will be used to determine the amount of installment taxes payable for 2021.

“i-tax allows the companies to pay the installment taxes where applicable, as per the projections made using the previous year’s tax liabilities,” Simiyu said.

Meanwhile, KRA has updated the individual tax returns in iTax in line with the legislative changes made last year, the Commissioner for domestic taxes affirmed.

Individuals can now file their 2020 income tax returns on iTax, she said, a process that begun on January 1, and runs until June 30.

“Individuals with employment income only can use the web-based pre-populated income tax return, labeled “ITR for employment income only,” KRA has said.

Those with other income in addition to employment income are required to download the excel income tax return to make their declarations.

In April last year, the government announced a number of tax measures to help individuals and companies cope with the pandemic, among them the reduction of VAT to 14 per cent from 16 per cent,  Income Tax Rate (Pay-As-You-Earn) reduction to 25 per cent from 30 per cent, and Resident Income Tax (Corporation Tax) reduced to 25 per cent, from 30 per cent.

These however have gone back to normal, effective January 1.

The tax break period saw KRA forego about Sh65 billion in taxes, which according to the taxman, the monies went into the citizen's pockets.